I got a call recently from a gentleman who was upset that the city of Eureka’s Measure H Sales Tax passed. To demonstrate his displeasure, he wanted me to know that he would be leaving the area to buy a new car. Government needs to be run like business, he said. This common reaction against taxes is flawed on both a practical and ideological level.
Sales tax is the primary contributor to the city’s general fund in Eureka, and many other California cities. If you like paved roads, maintained parks, public safety and other services provided by the city, you enjoy them because those funds are available to use. When you buy items other than vehicles, the sales tax stays in the jurisdiction where it is purchased, so shopping local contributes directly to your quality of life as well as supporting local businesses.
When purchasing a vehicle, however, shopping around for a lower sales tax rate will not result in a lower cost because of how vehicles are taxed in California. The sales tax rate (7.25%) is the rate that applies where the vehicle is sold and in the use tax rate (In Eureka, Measure Q, Measure D & Measure Z = 1.25%) applies where the vehicle is registered. The sales tax rate is same across the State and the use tax depends on the jurisdiction where you reside. Both are included, no matter where the car is purchased.
The Bradley-Burns tax is 1% of the total state sales tax. It commits money directly to the jurisdiction where the item is purchased. If you were to buy your car out of the area, this is the portion that stays there. The remaining 6.00% goes to the State and 0.25% goes to the Local Transportation Fund.
In Eureka, the sales tax rate is currently 8.50% due to additional city & county taxes. Eureka district taxes, Measures Q and D, are .50% and .25%, respectively. If you are a resident of Eureka, this amount will always go to Eureka, no matter where you buy your car. Measure Q will be sunsetting at the end of this year and will be replaced with Measure H, which will increase that amount .75%. Measure Z is a county tax at .5%. That money will go directly to the County of Humboldt for public safety.
Right now, if you purchase a $10,000 car outside of Eureka, the jurisdiction where you purchase it will get $100, Eureka will get $75; the county will get $50, the state will get $600 and the state’s Local Transportation Fund will get $25, totaling $850. The cost is the same if you stay in Eureka, except the Bradley-Burns money will stay local instead of going to another community. If you buy that same vehicle after July 1 when Measure H takes effect, the total sales tax will be an additional $75, with the additional money going to Eureka. This formula can be translated to other California cities, using each jurisdiction’s local use tax figures.
From an ideological perspective, I strongly believe that governments are not businesses. With few exceptions, business decisions are made to increase profits. This simply doesn’t apply to government. The return on investment made by the government is not measured profit, but by the quality of life of the residents.
Unlike a CEO who can make changes immediately, there are limited occasions when changes can be made in government without going through a public process. That includes increasing sales taxes, which must be approved by the voters. Measure H required a simple majority to win, and did with 66.41% of the votes, a solid approval.
That said, governments should be prudent in their spending. They must balance the needs of the community with the available funds they have to work with. That is why there are meetings and workshops to discuss things like the budget, capital improvement plans and whether or not to add a sales tax measure to the ballot. Public participation is encouraged.
To choose to shop because of a lower sales tax rate means sacrificing your voice about how that money is spent as well as not benefitting from those tax dollars being invested at home. Ultimately, tax dollars are your dollars. Do you want to give them away?
Susan Seaman is the mayor of Eureka. She received valuable input for this story from the city of Eureka’s finance director, Lane Millar. She can be reached at sseaman@ci.eureka.ca.gov.
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